Limited company vs personal: compare after dividend tax

Buying through a limited company has become the default advice for landlords, mostly because companies escape Section 24: they deduct mortgage interest in full and pay corporation taxat 19% to 25% on what's left. On paper the company usually wins. But profit inside a company isn't money you can spend. To use it, you have to take it out, usually as dividends, and dividends are taxed again.

The same deal, three ways

A £175,000 buy-to-let with 25% deposit, an interest-only mortgage at 5.2%, and rent of £1,200a month. We've compared what the owner keeps each year if they own it personally, if the company keeps the profit, and if the company pays the profit out as dividends at 2026/27 dividend tax rates (10.75%, 35.75% or 39.35% above the £500 dividend allowance).

For a higher-rate taxpayer the company still comes out ahead after dividend tax, but by £1,277, not the £2,070 the retained figure suggests. That gap is what a retained-profit comparison hides.

Where owning personally wins

A basic-rate taxpayer loses almost nothing to Section 24, because the 20% credit matches their tax rate. Add corporation tax and then dividend tax, and the company route leaves them with less money than owning personally, even though the retained figure looks better. If you'll need the rental income to live on, the retained number is the wrong one to compare.

What these figures don't include

The comparison above is deliberately narrow. Before deciding, also weigh:

• Company mortgages, which can carry higher rates and fees than personal buy-to-let lending.
• Running costs of the company itself: accountancy, annual accounts and filings.
• Whether you'll reinvest the profit. Retained profit grows faster inside a company, which is where the structure earns its keep.
• Tax when you sell, and the cost of moving an existing property into a company, which can trigger stamp duty and capital gains tax.
• Where you live. If you're resident abroad, your home country may tax the income or dividends too, so take cross-border advice.

The analyser runs this comparison on any deal: switch Profit Strategy to “Draw as dividends” and set your tax band. It's also covered on our methodology page.